With this year’s Easter shift from March to April, and the fact last year’s run was one of the strongest, it’s probably wise to take recent trends with a grain of salt. TDn2K’s latest Restaurant Industry Snapshot showed negative 0.4 percent same-store sales across the industry during April. That marked the second red month since the beginning of the year. But is it reason to panic?

“Putting these results in context helps us remain cautiously optimistic about the current state of the industry,” said Victor Fernandez, vice president of insights and knowledge for TDn2K, in a statement.

“When taking in a longer-term view of sales, the two-year growth rate of 0.9 percent during April still reflects a growing industry,” he added. “Furthermore, all months since October of 2018, with the exception of February, which was plagued by extremely bad weather, have reported positive same-store sales growth when compared with the same month two years ago. The average for two-year sales growth during the previous twelve months was [negative] 1.6 percent.”

There is one issue, however, that wasn’t an aberration. TDn2K’s data has long reflected, despite what else might be going on industry-wide, that excellent service differentiates top-performing brands. Unfortunately, it has never been more difficult. TDn2K studies, powered by People Report, revealed that most restaurant companies are never fully staffed.

“Even if other attributes of the restaurant experience, such as food and ambiance, have fluctuated in relative importance, superior execution on service remains at the heart of what successful restaurant brands do consistently,” TDn2K said.

It’s a problem pulling in two directions. On one side, restaurant turnover for hourly and management employees (already at historically high levels) climbed again in March. On the other, the industry continues to expand and create new jobs that need to be filled. Year-over-year growth in the number of restaurant jobs was 2.7 percent in March.

According to TDn2K’s Workforce Index, vacancies have increased at a relatively consistent rate over the past several quarters as the number of unfulfilled unit-level positions escalates.

In the first quarter of 2019, for example, 35 percent of companies reported an increase in their unfulfilled management positions, while only 12 percent were able to reduce their vacancies. Furthermore, 38 percent of companies had an increase in their unfilled hourly employee positions and only 10 percent made any progress reducing vacancies.

Those are pretty troubling figures. It suggests it’s becoming harder to staff positions, and yet there are openings to worry about. Not to mention the challenges with rising wages, gig competition, and soaring turnover rates.

READ MORE:

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“… most companies are facing the toughest challenges in their history when it comes to staffing their restaurants, unquestionably at the cost of subpar service level,” TDn2K said.

More on the sales trends

April’s rough result means two of the past three months have reported negative (February was minus 0.6 and March was positive 1.2 percent).

As TDn2K pointed out, April absorbed a blow from the Easter holiday, which often translates into decreased visits for many brands and, in some cases, closed restaurants. Due to the calendar shift, same-store sales growth approached negative 2 percent during the week of Easter—the worst for the industry since the last week of February when winter storms hammered large portions of the country.

The soft results were widespread as well. Only three regions (Western, California, and Florida) reported positive comps. The Western area was the top, yet still only achieved same-store sales growth of 1.1 percent. By comparison, March’s best segment—the Southeast—grew 2.87 percent that month.

The Southwest was April’s worst performing region, with negative comps of 1.92 percent and traffic declines close to 5 percent.

Of the 196 individual DMAs tracked by Black Box, only 84 (or 42 percent) were able to achieve positive same-store sales. The norm in recent months has been about 75 percent.

In March, 147 of the 196 markets reported above the line.

Segment wise, fine dining and family dining rose to the top in April. They were the most favored by incremental Easter sales. Quick service was the only other segment that achieved positive growth during the month.

Some trends stay put

Once again, traffic slid downward. Same-store traffic visits during April were negative 3.5 percent—a decline of 1.6 percentage points from March. Just like sales, the Easter effect needs to be considered. The third week in April experienced the worst traffic numbers since the end of February. And the holiday shift aided Mach’s guest counts but negatively impacted April’s.

“These poor traffic results again highlight how restaurants continue to rely on their guests spending more per visit to try to grow their sales,” TDn2K said.

Average guest check growth has accelerated since Q4 of last year. TDnK said this is likely  a result of brands raising menu prices at a faster pace, as well as a favorable shift in product mix driven by a more confident consumer.

On that latter note, Joel Naroff, president of Naroff Economic Advisors and TDn2K economist, said there were some warnings in the latest GDP report.

Most importantly, the growth in consumer spending was the weakest in four years,” he said in a statement. “There has also been a decline in the year-over-year growth in retail sales at restaurants. Is this softening worrisome? Maybe not. Incomes are still expanding moderately, consumer confidence is high and job gains remain strong. Thus, personal income growth is solid enough so that restaurant sales should improve. What is likely happening is the rebound in demand that began in 2018 and accelerated this year, is simply moving back toward sustainable levels.”

“Barring an all-out trade war, the economy should continue growing solidly the rest of the year,” Naroff added. “As labor markets tighten further, wage gains and household demand should pick up. Indeed, the only dark cloud is the elongated poor weather patterns that have restrained typical spring spending patterns. Since no one really knows how to forecast the weather, if we assume normal summer conditions, restaurant sales should accelerate.”